Bandhan Financial Services Pvt. Ltd (BFSPL) took many by surprise when it got one of the two banking licences from the Reserve Bank of India.
The IFC (International Finance Corporation)-invested microfinance firm has, in the past, won many awards. However, Chandra Shekhar Ghosh the Chairman and Managing Director admits that he too was not prepared for the giant wave of support and adulation that came his way after the announcements made by RBI earlier this month.
It has been a busy, busy phase since then Mr.Ghosh spoke to The Hindu about his plans to scale up operations and bring Bandhan’s 55,000 clients onto a formal banking platform.
What are your plans for launching banking services?
BFSPL is a microfinance organisation, which is also registered as a non-deposit taking NBFC.
We have been working for over a decade with women, giving them business loans for taking up a host of activities. Our aim has been capacity building and we provide loans starting from Rs.1000 and going upto Rs.5 lakh for business activities and from Rs.1000 to Rs.10,000 for non-business activities such as building a sanitary latrine) and children’s education, among others. We also give pension and there are 55,000 borrowers across 22 states, covering 173 un-banked districts. About 75 per cent of Bandhan’s coverage is in rural areas.
With the proposed launch of banking services, we will cover all our clients at one go and 50 per cent of the coverage would be in un-banked areas. This perhaps will be the largest single-sweep coverage of un-banked areas….
What is the business model you are contemplating?
We have a very viable model in our micro finance business and that model should work for the bank too. The loan portfolio stood at over Rs.6200 crore in 2013-14 against Rs.4400 crore the year before.
We are targeting Rs.7500 crore this fiscal . We will maintain our profitability, which is around Rs.200 crore.
We will need investments in setting up the IT infrastructure and also for the branch roll out, but that should not be a problem.
We have a capital base of Rs.1100 crore. However, initially profit will be modest.
What will be your areas of opportunity?
We will merge the existing microfinance business with the bank.
But our thrust area will be medium and small scale sectors. Reaching the un-banked areas would be one of the biggest areas of opportunity. We will target the poor and the segment just above that.
We would like to show that the poor can also be bankable. Our entire loan portfolio is directed at priority sectors and our recovery rate is 99.5 percent.
As we graduate from a MFI to a bank, our range of services will also expand such as accepting deposits and remittances. As we start taking deposits it should become possible for us to offer loans at rates lower than the present 22 per cent.
You have a sizable manpower. How do you plan to utilise them as you roll out banking services?
We have nearly 13,000 staff who reach credit at the doorsteps of our borrowers. They are in regular touch with our clients and we hope to utilise them to raise deposits too. About 95 per cent of employees are from poor families and rural areas. We have trained them up to their present task. We will, of course, need fresh recruitments at key places and some at senior positions. But I would like to train up these youths too.
What are the challenges ahead?
My father was a sweet-maker and we were a family of eight including all the siblings. My family could not afford my education beyond my Masters. After my father’s death, as the eldest son, the task of running the family fell on me. I started my career with a NGO based in Bangladesh (just across the border from where we stayed in Agartala) and it was the biggest of its kind in the world. After that I worked for several such NGOs. I saw poverty and deprivation close at hand... I realised from the way my mother used to run our home with limited income, that women were the best money-managers. This also inspired me to start my own venture.
I started Bandhan in 2001 with money borrowed from a money lender at nearly 80 per cent annual rate of interest. We have grown year-on-year andBandhan’s client base, its branch network and loan portfolio give me immense strength.
But yes, I do foresee some challenges. And one of these is the integration of this workforce with the senior banking professional that we will need to hire. It may be a culture shock on both sides.